US GDP growth undershoots expectations in final quarter of 2016

The American economy grew at an annualised rate of 1.9 per cent in the final three months of last year, below expectations of 2.2 per cent

Net trade contributed to lower US growth in the final quarter of 2016 (Getty)

American gross domestic GDP growth slowed to an annualised rate of 1.9 per cent in the final quarter of 2016.

The “advance” estimate from the Bureau of Economic Analysis (BEA) was lower than the 2.2 per cent that economic analysts had been expecting and down from a 3.5 per cent rate in the third quarter.

The data prompted US 10-year Treasury bond yields to slip around two basis points to just below 2.5 per cent.

The dollar index also fell 0.2 per cent to 100.45, although it rapidly bounced back up.

The BEA said the GDP deceleration was partly due to a downturn in exports and an increase in imports.

There was also a slowdown in consumption. Residential and business investment both picked up.

Full year growth for 2016 for the world’s largest economy is now estimated to be 1.6 per cent, down from 2.6 per cent in 2015.

The Office for National Statistics earlier this week estimated that the UK economy grew by 2 per cent last year.

President Donald Trump has said he will target 4 per cent annual GDP growth for the US, which he claims will be achieved through large tax cuts, infrastructure spending and renegotiated trade deals.

Economists said that the data was unlikely to prevent the US central bank, the Federal Reserve, from raising interest rates again soon.

“This is another clue that markets are still too cautious with respect to the timing of the next Fed rate hike. We see few reasons why the Fed should wait until June, and look for a March hike,” said Rob Carnell, chief economist of ING.